Trade What You See

They say that when markets sell off, irrationally awakening value investors, one has to trade what one thinks and not what one sees. Get a hold of the stock's valuation and not what is happening to its price action. And when markets are rising, attracting momentum traders, one has to trade what one sees and not what one thinks. Trade set ups and not valuations.

With what we are seeing with the equity markets today especially the S&P going into new highs, it is natural to doubt the possibility that prices will punch through. Why so? Because valuations and clarity of growth are things that are at the back of our heads. Those are the things that we THINK! But what we see are prices telling us to be ready for the bull market ahead.

It is normal to doubt a possible move up. I've been bearish for months now and here are the reasons why; exponential money printing, lack of growth, a great divide between elite and ordinary workers, China slowdown, Brexit, ISIS, negative rates etc. All of these things create a mosaic of investing fear. I am not saying that you should ignore all of these things and go gung ho buying stocks. All of these things should not keep us from our trading or investing plan. For me, since I am bearish, I trade stocks that I am bearish on, like Tesla (TSLA) and Chipotle (CMG). I dabble a little bit with longs like my position in the gold miners ETF (GDX), and Turquoise Hill (TRQ), gold miners that play on the currency devaluation story.

And so if I may suggest, it is ok to have cash in hand if you are not totally convinced of this market. And also, try to add a little technical analysis in your arsenal so that you can easily navigate your way through volatility. It can help you participate even a little bit in this kind of market condition. Participating a little, with the little yield you can find out there, is better than doing nothing and suddenly becoming out of touch of what's happening to the markets. Technical analysis can help you execute what you see.

 

 

Dislcosure: I am long GDX and TRQ, short CMG and TSLA.

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